If you’re thinking about an Individual Voluntary Arrangement, one of the first things you’ll want to know is whether you’ll still have enough money to cover day-to-day life. When you’re already stretching your income to cover everyday costs, the last thing you want is more uncertainty. You want to know, before you commit to anything, that you’ll still be able to pay for the things that matter.
How IVA Payments Are Calculated
Before your IVA is set up, your Insolvency Practitioner will carry out a detailed income and expenditure (I&E) assessment. This looks at everything coming in: your wages, benefits, pension, or any other regular income, weighed against your essential monthly outgoings.
The difference between the two is your disposable income, which becomes your IVA payment. It’s not based on how much you owe or how many creditors you have. It’s based purely on what you can realistically afford after your essential living costs have been covered.
How much does an IVA cost per month?
Your monthly IVA payment will be unique to your situation. There’s no fixed amount, as it depends entirely on your income and your essential expenses.
Your Insolvency Practitioner will go through your finances with you in detail to make sure the figure is sustainable. The goal is a payment you can maintain consistently over the full term of your IVA, not one that leaves you short every month.
What is the minimum IVA payment?
The amount you can afford to pay towards your debt each month is worked out from your disposable income, but creditors will generally expect your payments to your creditors to be at least £100 per month. Below this, then the IVA may not be suitable for you, as a lower disposable income may indicate a different solution is more appropriate.
That said, £100 is a floor rather than a target. If your disposable income allows you to pay more, your IVA payment will reflect that. The aim is to make your monthly payments as manageable as possible whilst still paying creditors a meaningful amount, ensuring you always have enough money to live on throughout the arrangement.
How much does an IVA leave you to live on?
After your IVA payment is made each month, what’s left is yours to manage your household and cover your day-to-day costs. Because your essential expenses are built into the I&E assessment from the start, you shouldn’t find yourself without enough to live on.
If you have an IVA, you need to be financially disciplined. Although the income and expenditure will include allowance for items such as hobbies, entertainment and gifts, it is important that you manage your budget around these. What you’re left with is enough to live comfortably, not extravagantly, while you work through your debts.
What expenses are covered in an IVA budget?
Your I&E assessment is a thorough review of your monthly income and your actual outgoings. Your Insolvency Practitioner will ask you what you genuinely spend in each category and work through it with you, though the figures will need to fall within standard industry guidelines that creditors use when reviewing your proposal.
Here’s what’s usually included:
Housing Costs
Your rent or mortgage payment is treated as a priority expense and will always be accounted for in full. This also includes service charges, ground rent and buildings insurance if applicable.
Household Utilities
Gas, electricity, water, broadband and your home phone are all included as essential costs. The amounts allowed will reflect your actual bills rather than a set national average.
Food & Groceries
A reasonable allowance for food, household cleaning products and toiletries is built into your budget. This is based on your household size, so a family of four will have a higher allowance than a single person.
Travel & Transport
If you drive or use public transport, your travel costs to and from work are included. If you own a car, this covers fuel, insurance, road tax and a reasonable amount for servicing and repairs.
Childcare & Education
If you pay for childcare, nursery fees, or school-related costs, these are factored in as essential expenses. This includes things like school uniforms and after-school clubs, where they are a regular, necessary cost.
Medical & Health costs
Prescription charges, dental treatment, glasses and any ongoing medical costs are all allowable. If you have a specific health condition that results in higher day-to-day costs, your Insolvency Practitioner can take this into account.
Clothing & Personal care
A modest allowance for clothing and personal hygiene products is included. This covers what you genuinely need rather than discretionary purchases.
Other Essential Costs
Depending on your circumstances, other costs may also be included, like:
- TV licence
- Pet food and routine vet costs
- Life insurance or income protection premiums
- Union membership fees, if required for your job
IVA Spending Restrictions: What Isn’t Included in Your IVA Budget
Whilst your essential living costs are fully protected, your creditors will expect your budget to reflect genuine necessity rather than lifestyle. Things that are generally not included are:
- Holidays and short breaks
- Lottery or gambling spending
If your income covers your IVA payment and your essential costs, how you manage what’s left is up to you. Your Insolvency Practitioner isn’t there to police every purchase, but your annual review will look at whether your income and spending have changed in any meaningful way.
How much does an IVA cost?
IVA fees are built into your monthly contribution, so you won’t face any upfront costs or need to repay any surprise bills. The fees are presented to your creditors as part of your IVA proposal and must be approved before your arrangement begins.
There are two main fees to be aware of:
Insolvency Practitioner Nominees Fees
Before your IVA is approved, your Insolvency Practitioner acts as the Nominee. This covers the work involved in assessing your financial situation, preparing your proposal, submitting it to your creditors, and handling the approval process. The Nominee’s fee is usually a fixed amount, though it can vary depending on how complex your case is.
Supervisor’s Fees
Once your IVA is approved, your Insolvency Practitioner becomes the Supervisor and takes on responsibility for managing the arrangement for its full term. This includes collecting and distributing your payments, carrying out annual reviews, corresponding with creditors, and handling everything needed to close the arrangement when you complete.
The Supervisor’s fee is typically charged as a percentage of the total amount paid into your IVA, usually around 15%, though some arrangements use a fixed fee structure or a combination of both.
For most IVAs, total fees range from approximately £2,500 to £4,500, depending on your circumstances and what your creditors agree to. Because these are taken from your monthly payments rather than added on top, they won’t affect how much you have left to live on each month.
What happens if my income changes?
Your IVA payment isn’t permanently locked in. Each year, your Insolvency Practitioner will carry out an annual review to look at your current income and expenditure. If your financial circumstances have changed significantly since your IVA began, your payment may need to change too. The important thing is to keep your Insolvency Practitioner up to date if anything changes.
If You Have Additional Income
Small changes to your income won’t automatically trigger an uplift to your payments. Most IVAs include an additional income threshold, which gives you a buffer before any extra earnings need to be paid into the arrangement. This is usually set at around 10% of your monthly income, so if your salary increases slightly or you pick up some extra hours, you won’t necessarily see your IVA payment go up straight away.
Should your income increase beyond that threshold, you’ll usually be asked to contribute 50% of the excess towards your IVA. The other 50% stays with you.
If You Receive a Lump Sum
Coming into a one-off sum of money during your IVA, like an inheritance, a tax rebate, or a lottery win, is treated differently from a regular income increase. Most IVAs include a windfall clause, which means any unexpected sum over £500 must be paid into the arrangement in full. Your Insolvency Practitioner will let you know how this applies to your specific terms and what you need to do if it happens.
If Your Income Goes Down
If your income drops, whether through redundancy, reduced hours, illness, or a change in circumstances, your payment can be reviewed and reduced to reflect what you can now realistically afford. The aim is always to keep your IVA manageable rather than push you into financial hardship.
A reduction of 20% or less can usually be made by your Insolvency Practitioner without needing to go back to your creditors. Anything larger will require creditor approval, but this is a straightforward process your IP will handle on your behalf.
Can my IVA payment be reduced if I’m struggling?
Finding it difficult to keep up with your payments? The worst thing you can do is say nothing and just stop paying your IVA. Your Insolvency Practitioner is there to help you through the full term of your arrangement, and there are options available if you’re going through a difficult patch:
Payment Variation
If your essential costs have risen or your income has fallen, your IP can agree to reduce your monthly payment by a small amount without involving the creditor. Larger variations need creditor approval but are a normal part of how IVAs work.
Payment Break
Your Insolvency Practitioner can pause your payments for a set period of up to 9 months if you are facing a short-term difficulty, like a period of sick leave or a temporary gap in employment. This is sometimes called a payment holiday. Any missed payments will usually need to be made up later in the arrangement, either through slightly higher payments or an extension to the term.
IVA Failure
Circumstances that change so significantly that no variation is workable may, in rare cases, cause your IVA to fail. Your Insolvency Practitioner will work hard to find a solution before it reaches that point. Should it happen, your debts don’t disappear, and creditors would be free to pursue you again, so it’s always worth exploring every available option first.
How much can I save whilst I have an IVA?
Saving during an IVA is possible, but there are limits. You’re not expected to hand over every spare penny to your creditors, and your budget will include a small allowance for things like household emergencies. Having a small buffer for unexpected costs is sensible, and most Insolvency Practitioners will factor a modest emergency allowance into your budget from the outset. However, accumulating significant savings whilst in an IVA is likely to be flagged at your annual review.
If your Insolvency Practitioner sees that you’ve been regularly setting aside money beyond what your budget allows for, they may treat it as undisclosed surplus income and ask for it to be paid into the arrangement.
